Crime, Corruption and One Man’s Pursuit of Profit in the New Russia
By Timothy Harper
Timothy Harper 1999
Moscow Madness: Chapter 1
Rick Grajirena eyed the two beefy Russians. One was wearing a cheap, ill-fitting suit. The other had on bluejeans, a black T-shirt, and a heavy leather jacket despite the August heat in Moscow. Were they carrying guns? Grajirena couldn’t really tell. Could they speak English? He couldn’t really tell that, either, given that their only responses -- to his greetings in English, and then in rudimentary Russian -- were nods and grunts. No matter. They were Grajirena’s bodyguards, hired for $25 a day each to keep him alive before, during, and after the meeting at which he intended to fire the manager of his company’s Moscow operations. Grajirena had been told that the bodyguards understood he had received death threats. And that the previous evening someone broke into the apartment where Grajirena was staying. Grajirena scrutinized the two bullet-headed Russians. They might be brothers. Grajirena wondered about their commitment to their work. They looked stupid, but were they stupid enough to risk their own lives to save his? For $25? He knew other American business people, especially bankers, who used bodyguards routinely in Moscow. But he himself didn’t know anything about bodyguards. Was he paying them too much? Too little? How much did other Americans trust their bodyguards? Grajirena consoled himself: at least Americans were not regular targets in the same way as successful Russian businessmen, particularly bankers. Fully two dozen Russian bankers had been assassinated on the streets of Moscow in previous months. Fortunately, no American business people had been killed by the so-called mafiya -- yet. (Though that would happen soon enough.) All Grajirena knew was that he didn’t want to be the first. As he often did, Grajirena pondered the wisdom of trying to do business in the “new” Russia, which had become the high-risk, high-reward frontier for adventuresome American entrepreneurs since the breakup of the Soviet Union less than three years before. Maybe he should have stayed home with his wife and two young kids in Clearwater, Florida, working as a yacht salesman and sailmaker, and hiring on as the unofficial weekend skipper for rich guys who wanted to race their sleek sailboats. But this wasn’t the time to think about that. Grajirena swallowed hard, said, “Let’s go,” and walked out of his office, one bodyguard in front, the other trailing, toward the car that would take him to meet and fire the manager.
* * *
Richard A. Grajirena was founder and chief executive officer of First Republic Inc., a Tampa-based company that imported and distributed Miller beer to Moscow. It was a small but high-profile company that was proving an American distribution network could work in the new Russia, and that Russians would respond enthusiastically to American-style marketing and promotions. Grajirena and his investors formed First Republic to provide what he jokingly called his “grownup” job after a long career as an international yachtsman. Over the years, Grajirena was involved in several sailing ventures with Russians, including making sails for the Russian Olympic yachting team. Traveling back and forth to Russia on sailing business in the late 1980s and early 1990s, after the fall of the Berlin Wall, he could see the coming economic changes in Eastern Europe, Russia, and the other former Soviet republics. He could also recognize his own need for change. He was almost 50 years old, and every nickel he ever earned had somehow come from sailing. While sailing provided a simple but comfortable life, he was looking for something that would give him the kind of money he needed to send his kids, now in grade school, to college in a few years. He also had started thinking for the first time about a decent retirement for himself and the younger wife he found after a long and happy bachelorhood. Grajirena (it is a Basque name, pronounced graj-uh-REE-nuh) formed First Republic in 1992, in hopes of using his Russian contacts -- from factory managers to government officials to popular sports figures -- as the platform for an import-export business that would take advantage of the fall of communism and the opening of Russian markets to Western capitalism. Russian people were free for the first time to buy whatever they could afford instead of what their government told them to buy, and they were eager for all manner of American products, from food and drink to cars and television programs. Russian companies were free to make and sell whatever they wanted for whatever price they wanted instead of relying on government production orders, subsidies, and quotas. They were eager to exploit their technical expertise and cheap labor to sell products to the West. Grajirena reckoned that with trade set to explode in both directions, to and from Russia, there was room for him to serve as the middleman for somebody. Anybody.
It was not difficult for Grajirena to find prospective partners and possible deals. Indeed, when it became known that he was an American looking to buy and sell in Russia, all sorts of characters -- some seemingly reputable, many obviously not -- came forward with one scheme after another. The propositions covered a broad range, but all had one common element: a commission or finder’s fee or percentage of the deal for the person bringing it to Grajirena. More difficult for Grajirena, and for many other American entrepreneurs in Russia, was settling on the right import-export products, and the right partners. He had literally hundreds of meetings with anyone and everyone, on both sides of the Atlantic. Countless meetings were held over drinks, and countless business proposals, many of them outlandish, blurred together in a haze of vodka. Through it all, Grajirena got an education about Russia and Russians. He was astounded at how the decades of central state planning had stunted the work ethic, and dimmed the ability of many Russians, even top managers, to grasp the most basic realities of free-market economics. Many Russians had difficulty understanding the simple profit-and-loss principles of the bottom line. People in the street, who had been clamoring for decades for what the government derided as Western decadence, had difficulty deciding which laundry detergent to buy when a couple of new brands suddenly appeared on supermarket shelves. “How do we decide?” one well-educated Russian woman wailed to Grajirena at a party. “Before, there was only one kind of soap powder, made by the state factory, and that’s what we bought.”
Grajirena was astonished and frightened by the reach of the mafiya and the ganglords relying on thugs who were happy to commit casual mayhem for a few American dollars. They used violence and intimidation to turn central Moscow into a version of gangland Chicago in the Capone era. The mafiya gangs -- they had no Italian connections; the Russians merely adapted the Sicilian word -- tried to get a cut of businesses springing up in the post-Communist free-market economy, and paid special attention to hard-currency operations. Now, in 1994, two years after he first got the idea to import American beer into Russia, Grajirena again studied the two bodyguards. If they weren’t part of a mafiya gang, they probably were on the fringes. They were probably small-time hoods, independent contractors, who were eager to undertake any sort of dirty work at the behest of any mafiya leader who hired them for a job, in the same way that Grajirena, through an old Russian sailing buddy, had hired them to protect his life.
The firing of the Russian manager of First Republic’s office in Moscow was the latest crisis in a series that began before the company opened its doors. Grajirena encountered a myriad of other problems, with both Russians and Americans, both inside and outside the company -- problems with Miller Brewing, problems with customs, problems with taxes, problems with the weather, problems with landlords, problems with investors, accounting problems, and problems with employees on both sides of the Atlantic. The current problem was Misha, the Moscow office manager who only a few months before had been First Republic’s golden boy. Misha was young, well-dressed, good-looking, and spoke English reasonably well. He seemed passably educated, but also street-smart. He certainly knew his way around Moscow. Grajirena suspected Misha at least knew some mafiya when he was first hired, in the autumn of 1992, as one of the company’s first three salesmen. However, Grajirena reasoned, mafiya connections weren’t necessarily a bad thing, as many other Western business people in Moscow had discovered. Maybe Misha could deflect some of the inevitable mafiya attention, and persuade the gang bosses to leave First Republic alone. If he had connections, maybe Misha could help get things done when First Republic encountered the inevitable problems with Moscow’s mind-numbing web of ever-changing rules, regulations, and requirements. Certainly Misha made a big impression on his first two days as manager of First Republic’s Moscow distribution operation. That was after Grajirena had to fire First Republic’s first Moscow manager, an American. That was one of Grajirena’s first encounters with the “Moscow Madness,” a common syndrome among Americans working in Russia. They came to Moscow and lost their professional and personal moorings. When Grajirena fired the American manager, Misha stepped in immediately. His quick thinking saved the company from a financial and public-relations debacle. Grajirena was grateful to him. In recent months, however, Grajirena began to realize that Misha was taking advantage of his position. He was spending company money lavishly, and hiring friends and relatives for questionable jobs. Beer and promotional items such as T-shirts were disappearing. Moreover, Misha made several serious management mistakes. He borrowed money for the company from a loan shark. And he “sold” a large shipment of beer to an apparent mafiya gang that was now refusing to pay.
* * *
When Grajirena arrived in Moscow, he called the office and found that Misha was out of town. He had gone on vacation in Greece. Perhaps Misha hoped he could save his job by avoiding a confrontation with Grajirena. Perhaps Misha figured his job was lost anyway, and he wanted to squeeze in one more paid vacation before he was canned. The people in the First Republic office were tense. One of the Americans pulled Grajirena aside and said one of Misha’s recently-hired buddies, a tough-looking Russian known only to the other staffers as Igor, had made a not-so-veiled threat. The Russian said he knew people who, for a mere $500, would relish the chance to kill a visiting American businessman, particularly one who was intent on firing Russian workers. Grajirena was not dissuaded, but he resolved to be even more careful than usual. He didn’t want to fire Misha in the office, so he looked around for a neutral spot. He called Jack Robinson, First Republic’s lawyer in Moscow. Robinson, however, was away, back home in Canada. He had made the mistake of trying to fire a Russian employee, his chauffer. The fired chauffeur showed up at Robinson’s apartment one evening, demanding $200 in back pay. The ex-chauffeur pushed his way inside the apartment, stole all the money he could find, and gave Robinson a savage beating. Striking him repeatedly with the blunt edge of an antique sword, he broke both Robinson’s arms in several places, and left the bleeding and unconscious Robinson handcuffed to the kitchen stove. The chauffeur positioned Robinson’s head near the over door, opened it, turned on the gas, and left. Fortunately, Robinson woke up before being overcome, and was able to shout for help. A neighbor called the police. The next day, after colleagues in Robinson’s law office tracked him down in a Russian hospital, Canadian authorities arranged a special flight home for him.
In the aftermath of all this, Robinson’s law office was decidedly cool to Grajirena’s request for help in firing a Russian employee. Grajirena asked one of Robinson’s partners to handle the voluminous paperwork required by the government, a hangover from the Soviet era when it was all but impossible to fire anyone. Grajirena also asked to use the law firm’s conference room for the meeting to fire Misha, and for the partner to serve as a witness to the dismissal. The partner said he would do the paperwork, but that was all. He wouldn’t allow Grajirena to use the office, and he wouldn’t serve as a witness. He wouldn’t use his firm’s letterhead or his name in any of the documents. The partner wanted to stay as far away from Misha as possible. “Be careful,” he urged Grajirena. “Get some security in your offices. And get some security for yourself.” A Russian friend in a nearby office agreed to lend Grajirena a conference room. He set the meeting for the day Misha was due back in the First Republic office after his vacation. Grajirena left word in the First Republic office that Misha should be sent to meet him at 10 o’clock in the morning. The arrangements all made, Grajirena returned to the apartment First Republic rented in Moscow to save on hotel bills. On recent visits, he suspected that someone had been entering the apartment while he was out. Somebody apparently had a key, and he didn’t like it. He started positioning a small piece of paper in the door, near the lower hinge, every time he locked it and went out. If the paper was on the floor, that would mean someone had opened the door. So far, each time Grajirena returned to the apartment the paper was still in the door. Each time, Grajirena felt a little foolish, as if he was playing spy. This time, however, the scrap of paper was on the floor. Someone had been in the apartment. Grajirena opened the door cautiously and looked around. No one was there. He quickly gathered his bags, caught a taxi, and checked into a hotel under a different name. He asked the desk to block all calls. Around midnight, the phone woke him up. Grajirena could tell someone was listening on the other end. But whoever it was never said anything. He hung up. An hour later it happened again. And an hour after that. At three o’clock he finally took the phone off the hook.
Grajirena was tired and nervous as he walked into the meeting with Misha. He wasn’t comfortable with these bodyguards, or with the very idea of having bodyguards in the first place. But he was glad they were with him when the door of the borrowed office at the Canadian Consulate opened and Misha, looked tanned and relaxed, walked in a few minutes after 10 o’clock.
Timothy Harper 1999